business plan - Heart for Africa

BUSINESS PLAN
A HEART FOR AFRICA INITIATIVE - SWAZILAND
CONTENTS
3.
Acronyms
Internal Analysis
20.
20. Marketing, finance and
accounting skills and resources
4.
Introduction
Production/operations/technical
Analysis - Figure 3.2
Assets
Analysis of internal skills and
Values
resources
Fundamental Purpose
9.
External Analysis
9. Environmental analysis: major
9.
trends and issues
Regulatory trends – basic
information
47. Vegetable Production: Cost &
Development of strategies to
14.
Profitability Analysis - Figure 3.5
25. Key targets
49. Cash Flow for vegetable production -
Persons responsible
27. Major risks and
Figure 3.6
50. Contour Map
51. Green Houses Layout
countermeasures
14. Size and growth
Project Implications
Profitability Analysis - Figure 3.4
48. Vegetable Production: Cost &
achieve objectives
10. Social cultural trends and issues
11. Technological trends and issues
12. Regional trends and issues
Industry Analysis
45. Fish Production Cash Flow - Figure 3.3
46. Range analysis of projected fish
production
23. Value chain analysis
24. Strategy identification
Economic trends and issues
38. Project Canaan Budget
42. Corn Production Cost - Figure 2.1
43. Fish Production: Cost & Profitability
44. Fish Production: Cost & Profitability
SWOT analysis
Mission Statement
28.
28. Economic factors
28. Social implications
Power of buyers
Power of suppliers
15. Threat of substitutes
Financial Analysis
Threat of entrants
Nature of rivalry among
30.
30. Project budget description
competitors
Corn production
16. Distribution channels
Fish production
Costs
32. Vegetable prodction
Customer Analysis
18.
18. Customer Need Analysis
Strategic Control
34.
34. Reporting requirements
Review process and period
Competitor Analysis 19.
Investment Opportunities
Written by: Kaleli Mulli
2
37.
Analysis - Figure 3.1
skills and resources
4. Executive Summary
8. Vision
Appendix
35.
Edited by: Wayne Clark, Howard Hodel and Carl Watry.
ACRONYMS
AIDS Acquired Immune Deficiency Syndrome
ASAL
Arid and Semi-arid Land
CPP
Crop Protection Products
EUREP GAP
European Union’s Good Agricultural Practices
FPE
Free Primary Education
GLOBAL GAP
Global Good Agricultural Practices
GDP
Gross Domestic Product
HACCAP
Hazard Analysis Critical Control Points
HFA
Heart for Africa
HIV Human Immunodeficiency Virus
IPM
Integrated Pest Management
IDA
International Development Association
IFAD International Fund for Agricultural Development
IT
Information Technology
ISO
International Standards Organization
MYOB
Mind Your Own Business Accounting Software
NAMboard
National Agriculture and Marketing Board
NGOs
Non-Governmental Organizations
PEST
Political Economic Socio-cultural Technological
PC
Project Canaan
PRSAP
Poverty Reduction Strategy and Action Plan
R & D
Research and Design
SACU
Southern African Customs Union
SAGE
Accounting Software
SIDA
Swedish International Development Corporation Agency
SHIES
Swaziland Household Income and Expenditure Survey
SNL
Swaziland National Land
SWOT
Strengths Weaknesses Opportunities Threats
TDL
Title Deed Land
UNESCO
United Nations Education, Scientific and Cultural Organization
UNICEF United Nations International Education Children fund
UNDP United Nations Development Program
USAID United States Agency for International Development
USCB
United States Census Bureau
VCA
Value Chain Analysis
WFP World Food Programme
3
EXECUTIVE SUMMARY
M
ost of Africa is in a well-documented crisis relating to poverty, war, lack of development,
lack of education and disease, most notably the HIV/AIDS pandemic. Most Africans
have only a fourth grade education and 314 million Africans live on less than $1 a
day. It is documented that 6,400 people die daily from AIDS in sub-Saharan Africa.
Every 14 seconds a child is orphaned by AIDS leaving 11 million AIDS orphans in subSaharan Africa.
One of Africa’s smallest nations is in many ways in the worst trouble. Swaziland has
an area of only 6,700 sq. mi. and is about the size of New Jersey. It is almost entirely
contained within the north east quadrant of the Republic of South Africa, sharing one
small part of its border with Mozambique. Swaziland is a predominantly Christian
country, with a stable government for over 100 years, and is the last independent
monarchy in Africa. It has one tribe of people, one language and has never known war.
It ought to be one of the garden spots of Africa, but this tiny nation is dying.
In 2005, the population of Swaziland was 1.1 million people. Today its population has
fallen to 950,000 and continues to decline predominantly due to AIDS. Swaziland’s
documented AIDS rate is 42.6% but practitioners on the ground believe is it closer to
56%. As the parents die of HIV/AIDS, the orphans and vulnerable children (OVC’s)
are being cared for by grandmothers (or Gogos) or by older children in the family. It is
estimated that there are 200,000 + orphans in the country with eight thousand (8,000)
more Swazi children becoming orphaned each month. It is reported that there are over
15,000 orphan-headed households in Swaziland with some caregivers as young as 10
years old.
Swaziland
Capital Lobamba (Royal & Legislative)
Mbabane (Administrative)
Largest City Mbabane
Official Languages English, siSwati
Area 17,364 KM2 or 6,704 sq. mi.
Currency Lilangeni
Motto “Siyinqaba” (SiSwati)
4
EXECUTIVE SUMMARY
The largest single need in Swaziland (as in much of Africa) is food. Even when people
band together to create homes for the OVC’s, they still struggle to provide enough
food. Many people from the West have responded by creating new children’s homes,
supporting indigenous homes and/or sending aid in one form or another--all good
efforts, but that is still not enough. At Heart for Africa (HFA) our response is Project
Canaan, a 2,500 acre tract of land which will be home to a very large farm providing
food and the income necessary to sustain our partner OVC homes. In addition, this
multi-use property will involve childrens homes and schools for OVC’s, training centers
“
“
...over 500 acres of
ground crops...
and a medical clinic.
The farm is expected to consist of over 500 acres of ground crops, 20-25 acres of
greenhouses, a large, multi-pond fish farm, an ISO approved export facility and a much
needed dairy farm and processing plant. The dairy farm alone would have a major
impact on the country. Swaziland consumes over 15 million gallons of milk annually but
produces only 2 million gallons internally, requiring them to import 13 million gallons
of milk each year. The government encourages milk production because the current
processing plants are already at maximum capacity.
Heart for Africa a 501(c) 3 registered charity, initially established Project Canaan (PC)
to provide financial assistance for its supported orphan homes. HFA’s leaders are
former founders and owners of one of the largest marketing firms in Canada in the
1980’s. HFA partners with already existing but fragile children’s homes in Africa and
supports them by providing child sponsorship, building home infrastructures, and
providing food, clothing and shelter to indigent children and planting gardens in rural
homes among many other activities. More can be learned about HFA on its website,
www.heartforafrica.org.
5
INTRODUCTION
HFA is developing Project Canaan in partnership with successful business people
from North America, who are working in collaboration with talented, experienced and
educated business individuals from Kenya and Swaziland, to create a unique, tailormade organization that meets the needs of African children living in abject poverty in
Africa and to address food scarcity and nutritional deficiency in a region where HIV/
AIDS has destroyed many lives. Project Canaan’s agricultural operations in Swaziland
will provide food for the children’s homes that HFA supports. Excess produce will be
sold to pay farm operating expenses with excess income used to subsidize other
essential costs such as children’s medical care, education material, staff salaries in
the homes and more. It is the stated goal of Project Canaan to assist HFA homes to
become self-sustaining.
Project Canaan objectives:
1. Feed a significant number of starving Swazi Children.
2. Improve the nutritional health of those children.
3. Provide a safe and secure home environment for orphaned and
vulnerable children (OVC’s).
4. Provide a school for the education of children both among our
OVC’s and in the community.
5. Provide vocational training opportunities for our mature children.
6. Provide stable employment for people in the community.
7. Provide a medical clinic to care for our OVC’s and the people in the
community.
8. Improve the quality of agri-business in the country through
greenhouse hydroponics, fish farming, dairy farming, food
processing and marketing and ISO approved exportation.
6
“
“
... feed starving
children
INTRODUCTION
Others have gone before us and proven this model can and will work. Project Canaan
will emulate a successful project in Kenya called Mully Children’s Family (MCF) that
has carried out sustainable agriculture for more than 15 years, and has a proven track
record in hydroponics, fish farming, animal husbandry, outdoor vegetable production,
and poultry farming. MCF is a charitable, Christian organization that rescues,
rehabilitates, educates and offers basic and secondary support to over 2,000 children
residing in its homes. The emulation of this mature MCF model is essential to our plan
so that “reinventing the wheel” will not be necessary at Project Canaan.
“
“
...Sustainable
agriculture at
MCF Kenya
Project Canaan will have multiple approaches to farming utilizing both outdoor and
greenhouse crop production, fish farming, the raising of poultry, and milk production.
PC will establish a tree propagation unit to produce seedlings that will at a certain stage
be distributed throughout the country at cost in areas where deforestation has taken
place. Replanting trees and large shrubbery will sustain a suitable micro climate that
furnishing suitable conditions for farming wherever they are utilized, thereby increasing
Swaziland’s crop production.
The plan will also involve the production of fruit, utilizing both commercial and indigenous
trees. These plants will be irrigated during the dry seasons. The land has a very good
supply of sub-surface water and is ideally suited for the construction of coffer dams
and large lakes to capture and store massive amounts of rain water in season for year
round use.
Finally, Project Canaan will greatly enhance the well being of the community at large
through the provision of food, jobs, medical care, education and training. As such, it is
being welcomed by the community, the local Rotary groups, churches, businesses and
governmental leaders.
7
INTRODUCTION
Vision
A Swaziland free of hunger and malnutrition with an emphasis on the wellbeing of orphans and vulnerable children.
Mission Statement
To be a premier organization committed to providing and promoting leadership in
sustainable agriculture, and advanced crop and animal production.
Values
As a premier regional organization working on developmental issues, Project
Canaan is committed to upholding the following values in its activities:
1. Integrity
Embrace a culture of honesty, sincerity with our staff, customers, suppliers
and donors.
2.Innovation
Actively engage in designing and developing novel methods of efficient and
useful agricultural technologies and activities.
3.A ccountability
Have responsible and ethical working and reporting systems.
4.Environmental
friendliness
Be environmentally conscious and promote sustainable conservation
activities that will enhance biodiversity within the project.
Fundamental Purpose
To give hope to vulnerable children in Africa who are poverty-stricken and
orphaned (especially by HIV/AIDS) through the provision of nutritious food,
security, shelter, education and medical care, and to improve the lives of the
rural poor by providing employment through sustainable agriculture.
8
EXTERNAL ANALYSIS
Environmental analysis: major trends and issues
(This is treated in detail below)
Regulatory trends and issues – basic information
The Agricultural Acts of the Parliament and traditional tribal laws in Swaziland constitute
the principle land use statutes covering, among other things, soil conservation and
agriculture land use. The traditional laws and regulations’ main jurisdiction is over the
community owned Swazi National Land (SNL), but the Acts of Parliament also cover
privately owned Title Deed Land (TDL).
The Minister responsible for agriculture and for the conservation of soils, the protection
of dams/water catchments, the prevention of soil erosion and the protection of soil
fertility, may after consultation with the Prime Minister, make decisions pertaining to
the regulation and/or control of clearing of land for cultivation, grazing or watering of
livestock and/or the clearing of vegetation.
There are Acts of Parliament that provide for the establishment, development and
sustainable management, including conservation and national utilization of forest
resources for the socio-economic development in the country. Copies of the Acts of
Parliament can technically be purchased from the Ministry, though access to the Acts
is usually a challenge as it is not a common practice for the public to acquire them.
Economic trends and issues
GDP growth per capita slowed between 1994 and 2004 to an average of 0.3% from 3.6%
per annum from the previous decade. HIV/AIDS, drought, reduced foreign investment
and increased unemployment, were major contributing factors to the slowdown. With
an annual income of US$ 1,350 per family in 2003, Swaziland has had a lower-middle
income economy (IFAD, 2006). However, this per capita income has been and is still
skewed by the extreme wealth at the top of the society. The country presently has an
unemployment rate that is variously quoted between 55 and 70% depending on the
source, but everyone agrees it is substantial.
Swaziland has a relatively open free market economy and is a participant in international
markets. Public operators play a major role in the economy, while the private sector is
subject to market forces and global international trends.
In Manzini province (wherein lies Project Canaan), most of the inhabitants live by
subsistence farming. The growing of maize and dry beans is widespread, though it
is not sufficient to provide adequate food or proper nutrition for the entire population.
Economic activities such as retailing, fruit farming, labor services in farms, have been
established by inhabitants over the recent past at Malkerns, Ezulwini and to a lesser
extent at Sidvokodvo localities. Sidvokodvo (pronounced sta goit’) is the location of
Project Canaan.
Farmers’ willingness to conserve, maintain, or improve natural resources is critically
affected by the cost relative to the monetary return involved in that undertaking.
9
EXTERNAL ANALYSIS
That is, a direct inter-linkage between resource and revenue needs to be visible to the
farmers for them to appreciate the resource. Degradation of resources considered of
marginal economic importance (for instance, high value resources such as water &
trees) is not likely to be a concern, much less a priority for local farmers. For instance,
they will over-harvest the trees for their personal use with no regard for the overall
impact to the environment and with little consideration of “ownership.” (There is
active tree poaching activity in Swaziland.) If this degradation is important to other
groups, education, coupled with the use of subsidies or other external incentives, may
be needed to encourage investment. Regulations may also be used, but without a
supportive incentive structure, may be difficult or costly to enforce. Swaziland must find
ways to bring the desperately poor people into the economy through the creation of
jobs and other assistance if they are going to encourage personal investment. Project
Canaan will aid in this effort by providing hundreds of jobs over time.
Swaziland is ranked 147 out of 172 countries in terms of human development indicators,
with an index of 0.498 (UNDP, 2006). This reflected a steady decline from the peak of
0.624 in 1990 and a long term slide from 0.530 in 1975. The country has also dropped
47 places in terms of GDP since 1990, according to the United Nations Development
program’s rating.
“
“
...Sidvokodvo,
Swaziland.
Location of
Project Canaan
Socio-cultural trends and issues
Swaziland’s population was 1.1 million in
2003, but according to both Swazi
governmental and independent sources such as the USCB and the Canadian
government had dropped to 950,000 by the end of 2008 due to the HIV/AIDS pandemic.
The population density of 64 persons per km2 in 2003 fell to 56 persons per km2 in
2008 due to the negative population growth rate. Nearly 76% of this population lives
in rural areas.
There has been a drastic decline of key social indicators over the past five years.
Average life expectancy is now said to be 29 years as opposed to 32.5 years in 2006.
These are the lowest statistics in the world. It is a clear reflection of the HIV/AIDS
10
incidence of the country, which, in percentage terms, is the highest in the world.
EXTERNAL ANALYSIS
According to the government survey of pregnant women, 42.6% were HIV positive in
2004, and 56% in 2005 (IFAD, 2006). It is estimated that there are 200,000+ orphans
and many NGO’s and church leaders claim that more than one half of the total
population are OVC’s. The change in life expectancy from 60 years in 2000 to 29 in
2008 was completely unexpected. Eventually, adult Swazis outside of the Royal family
could be an “endangered species” and this country could soon become a country of
orphaned children raising children.
Despite a previously relatively high per capita GDP for an African country, income
distribution has always been skewed. According to the Swaziland Household Income
and Expenditure Survey (SHIES) of 2001 (the latest data made public), the richest
20% consumed 56.4% of the national income compared to 4.3% for the poorest 20%.
It appears that this extreme disparity has only widened since then.
“
“
...70% of the Swazi
population lives in
extreme poverty
A 1997 survey classified over half the population as living in poverty, with three quarters
of the poor being found in rural areas. The absolute poorest inhabit the marginal (mostly
arid) lands found mainly in the north, while others live in areas with high and medium
potential for agriculture.
Technological trends and issues
Agricultural technology is at its infancy in Swaziland. There are a number of modern
agricultural methods, however, employed in various parts of the country, mostly in the
privately-owned TDL. The most popular of the methods is sprinkler irrigation, which
is the mechanical conveyance of water through rotating devices that spread water
onto the crops. Drip irrigation is also utilized, varying from simple elevated water
tank feeding water, to drip lines applying water directly on the crops, to more modern
irrigation systems that carry out automated water application programs to supply both
water and fertilizers to the plants (fertigation).
11
EXTERNAL ANALYSIS
Sprinklers provide water for sugar cane, pineapples and other crops in Swaziland. To
a lesser extent, farmers use drip irrigation on citrus and vegetable farms in selected
areas of the country. The community-owned SNL represents 70% of all land and is
predominantly covered with subsistence farming, which consists mainly of growing
maize, a dietary staple that has little nutritional food value. New designs to better
utilize water in farming will be unavoidable to counter the effects of drought that has
periodically affected the country in past years. Project Canaan will eventually adopt a
computerized, efficient water conveyance irrigation system.
“
“
...sprinklers in use for
irrigation purposes
Regional trends and issues
Swaziland is a member of the South African Customs Union (SACU), which is the
regional trade organization whose main objectives are to promote cross border
competition among member states, enhance economic development of the members
and promotes the integration of member states into the global economy through trade
and investment initiatives (SACU annual report, 2007). Within its structure, SACU has a
relatively new Agricultural Liaison Committee, which is charged formulating Agricultural
policy and conducting policy audits. There is currently no information available to the
public on the results of the policy audits.
South Africa is the largest of the member states of SACU, though its agricultural sector
contributes only 6% to the national GDP.
Swaziland is party to a number of other regional and international trade agreements
that have proved to be of enormous benefit to new and existing investors.
12
EXTERNAL ANALYSIS
·
·
·
·
·
International Markets
SADC Free Trade Area
COMESA (Common Market for Eastern & Southern Africa)
EPA (Economic Partnership Agreement)
AGOA (Africa Growth & Opportunities Act)
SACU-MERCOSOUR
Southern African Development Community - an association of 14 Southern African
states whose objective is to sustain regional collaboration in order to promote economic
growth and improve general conditions.
The Common Market for Eastern and Southern Africa - represents 20 countries and aims
to promote cooperation between the member states in all areas of economic activity.
General Systems of Preferences (G.S.P.) - under the G.S.P. Swaziland enjoys
preferential market access and quota free entry to the U.S.A.
African Growth and Opportunity Act (AGOA) : Duty and quota free access to the USA
market for more than 6,500 products.
·
·
·
·
·
·
·
Other international links include membership of:
African Development Bank
The Commonwealth of Nations
International Monetary Fund
African Union
The World Bank
World Trade Organisation
International Labour Organisation
Swaziland is also a member of the United Nations.
13
INDUSTRY ANALYSIS
T
he main goals of Project Canaan are altruistic more than financial. We want to feed
hungry children in significant numbers and improve the quality of life economically
and socially in the Swazi community. Excess farm product will be sold and marketed
in order to raise funds for other needs in our OVC homes. We intend to make our
children’s homes as self-sustaining as possible to minimize or eliminate the need
for outside donations. The market analysis found herein is done to describe the
opportunity to raise money through agribusiness, but the reader should understand
that raising money is not our primary goal.
Size and growth
The size and growth rate of an industry are important as they indicate the number
and size of competitors the industry can accommodate. A big industry can normally
support many competitors without much conflict, as each competitor has a share, and
competitors can therefore choose certain market segments to operate in. A growing
industry is likely to experience severe competition, as new entrants are attracted by
the opportunity to profit.
Project Canaan will operate in a comparatively small, growing agricultural industry
that is mainly in the sugarcane and timber sub-industries. Horticultural activities will,
therefore, provide an opportunity for Project Canaan to become a market leader in
Swaziland for highly needed produce both locally and internationally. The horticulture
business has over the past few years been growing at a minimal rate, due to
competition from a more developed production system in KwaZulu-Natal province in
neighboring South Africa.
Power of buyers
There are many potential buyers of our agricultural products and their purchasing
power varies significantly. The aim is to have a diverse buyer base that is able to
purchase the products at competitive market prices. There are large markets in South
Africa that buy produce in large quantities, and then supply them to supermarkets
throughout the country, especially in Gauteng province. Gauteng province when
ranked as a state would be the fifth largest economy in Africa with an average per
capita income exceeding $5,000. Gauteng can be likened to the State of California
(USA), in terms of contribution to the national income. These same chains also
control most of the food outlets in Swaziland.
The European Union is a major buyer of fresh produce from African countries. Large
supermarkets such as Tesco purchase considerable amounts of produce from
Africa. The European markets especially those of the Netherlands, United Kingdom,
Germany and France have well developed channels to buy agricultural produce
from around the world. The largest flower auction in the world is held at Alsermeer,
Netherlands. The population of the other three mentioned countries is over 150
million inhabitants, with per capita income exceeding $20,000. It is a big market.
Power of suppliers
Some farm equipment is available from dealers within Swaziland, but many of the
fixed assets will probably be imported from neighboring South Africa and other
countries such as Israel, the United States, and Italy, which specialize in certain types
14
of equipment. The aim is to purchase high quality equipment with long life that can
INDUSTRY ANALYSIS
be easily be serviced within the country. As for supplies such as seeds and fertilizers,
there are suppliers like Mayseeds and Hygrotech from South Africa that have reliable
bases in Manzini.
Vegtech and Amiran are possible suppliers of greenhouses to PC. Azrom, Ltd is a
supplier of greenhouses from Israel. Amiran is the retailer and assembler of Azrom
greenhouses, which are more competitively priced than its greenhouse counterpart,
Vegtech, from South Africa. The purchase of local manufactured or second hand
greenhouses is also possible for Project Canaan.
Threat of substitutes
In a free market, substitute goods may be of great concern. To counter substitutes,
an array of varied vegetable and animal products need to be produced at Project
Canaan. One of the main threats that substitute products have on other products is
price. With efficient, high volume production processes, pricing of goods will be at
competitive levels.
The danger of substitute products is that they reduce the normal profits of an industry.
Substitute products that deserve the most attention strategically are those that are
firstly, subject to trends, hence improving their price-performance trade-off with the
industry’s produce, and secondly, those which are produced by industries earning
high profit.
Threats of entrants
The barriers to entry are the obstacles that a firm must overcome to enter the
industry. The barriers can be tangible or intangible. Tangible barriers include capital
requirements, technological know-how, resources, and legal regulation in an industry.
The intangible barriers include reputation of existing firms, the loyalty of consumers
to existing brands, and access to managerial skills required for successful operation
in the industry. Farming entrepreneurs are normally interested in venturing into
businesses that give high returns. In most cases it follows that the higher the returns,
the higher the risk and investment costs, creating risk-averseness. Due to the high
investment involved in such a project, the threat of entrants is minimal in Swaziland.
One of the most challenging aspects of entering a marketplace is finding a reliable
market for produce. This limits the number of people wanting to engage in advanced
agriculture. Project Canaan’s has laid out strategies of countering both tangible and
intangible barriers by utilizing technology to produce high quality products in a highly
efficient manner. This will give us an advantage in the industry.
Nature of rivalry among competitors
Industries that possess high numbers of rivals in most instances exhibit strong and
unfavorable competition. In the case of Project Canaan, there are few significant
competitors within the agricultural industry in Swaziland, and since the technology
that will be used will be superior, Project Canaan will be able to lead in the market
place. Project Canaan will need to be alert by having a strong market intelligence
team and by being a learning organization. We will need to have a research and
development team in order to maintain leadership in the industry.
15
INDUSTRY ANALYSIS
Distribution Channels
Proper consideration of distribution channels is vital to our success, because it
leads to acquiring customers who are looking for convenience and speedy delivery
of agricultural products. The distribution channel can be a source of competitive
advantage when the channels used give a cost or pricing advantage over our
competitors. In our business, internet and e-commerce may also be convenient
distribution channels, with our own transport vehicles used to transport products to
large local consumers or to airports for export.
Farmers the world over are known to work in difficult circumstances, provide essential
products while earning meager income due to the activities of “middle-men.” PC will
endeavor to eliminate any form of middlemen who might interfere with our competitive
advantage. Those that will be part of the distribution chain will only be as deemed
necessary for the existence of the farm. We will also need to become processors as
well as producers. Success will require careful balancing of costs and benefits across
distribution channels related to convenience, speed and reliability.
Project Canaan intends to supply its excess product to the following markets:
1. Local supermarkets in Swaziland
2. Local hotels in Swaziland
3. Supermarkets in South Africa, Europe, America & Asia
4. International hotel chains
Produce grown through this project will require a ready market. More information
about the above channels will need to be obtained regularly since these products are,
perishable and product availability is typically seasonal, and demand change.
Costs
Analyzing the cost basis of any industry is crucial to success. The cost structure of
products and the industry will determine the prices which consumers will be charged.
Customers are keen on price, and when they buy a service or product, they are
buying it for its value. If consumers perceive it to be of high value, then will they be
willing to part with extra monies to possess it. There are those consumers who will
be willing to pay more for a product due to its innovativeness, packaging style or
simply because of its uniqueness. And these high margin product opportunities will be
studied when considering niche markets.
Producing agricultural products requires considerable cost accumulation prior to
delivery and payment of the final product. Expenses will be generated as a result of
purchasing seeds, transporting various planting materials, irrigating and fertilizing
crops, insuring through the Crop Protection Products (CPP) application, paying
wages and transporting crops to market. These costs will be offset by having all
products priced in a range that is affordable to the consumers and also that covers all
the costs incurred in the production and transportation process.
16
INDUSTRY ANALYSIS
Therefore, in considering industry cost, Project Canaan shall be very concerned with
all the relevant costs, which include operations, processing, marketing, selling and
distribution, administration, and R & D costs within the horticulture, fish and dairy
industries. All these will form our cost profile and will need to be monitored frequently
with an aim of keeping them at minimal levels. If costs can be kept at low levels
through economies of scale, innovation, and efficiency, the profit margins are going to
improve and Project Canaan would then enjoy higher net incomes, and hence higher
returns on investment. A cost-profitability analysis has been carried out in the budget
process to determine the most appropriate price per unit product.
“
“
...greenhouse
hydroponics
17
CUSTOMER ANALYSIS
C
ustomer attraction, customer satisfaction, and customer retention are key to any
business survival. For us to be able to identify the changing needs of our customers,
we will need to do the following:
Customer Need Analysis
Discovering the unmet needs of different groups of customers requires explicit
knowledge of the market place. Markets are very diverse in location, composition,
culture, tastes and many other variables. The needs of customers are varied
depending on their lifestyle, social-cultural, and economic factors. It is thus important
to identify segments of specific need within the industry and to satisfy the needs of
each segment. Each segment needs to be identified, described and understood to
predict the behavior of buyers and pricing power in that segment. It will be important
to discover what drives the purchase decision of customers in a given segment.
This will enable us to develop key resources and skills that will be used to create a
sustainable competitive advantage in each market segments.
Some high-end consumers will spend more on products that are grown under
more sophisticated or natural conditions. Production of food products using
hydroponic, organic farming and ISO certified conditions can bring a premium
price from those consumers.
The socio-cultural nature of consumer groups can be seen through acceptance of
certain food products as opposed to others. Some cultures perceive consumption of
fish as being more nutritious than beef. Nutrition matters, but cultural perceptions play
a big role also. For instance, in the Swaziland beef is less valued and less expensive
than other meats.
18
COMPETITORS ANALYSIS
A
nalysis of competition enables an organization to assess whether or not it can
compete successfully within a given market with given profit opportunities and
threats. To have a competitive edge, every organization should conduct a thorough
analysis of competitors in order to identify those with whom it wishes to compete and
to determine the best ways to outperform them. Competitors fall into two categories
– direct and indirect competitors. Substitute products that would become future
competitors should also be analyzed as they will also form part of our competition.
Information about competitors in Swaziland is very limited. Most of the competitors
are on the privately-owned TDL farms that usually protect information. Farm
implement suppliers, the Ministry of Agriculture and the NAM Board indicate that
the farms that are involved in horticulture are small to medium scale, and have not
invested a significant amount of assets in their production process. This gives Project
Canaan an advantage in the horticulture industry in Swaziland.
It is imperative that competitors are taken seriously and that continuous surveying
of competitor activity is carried out regularly. As much as we anticipate being market
leaders in Swaziland, competition can also be found from outside of the country.
Since Project Canaan will be engaged in an open and liberal market, competition will
eventually develop from neighboring countries, especially South Africa. Therefore,
mechanisms to counter such competition will need to be developed by offering
products to the market that are high quality in production, packaging, delivery and
product pricing.
19
INTERNAL ANALYSIS
Marketing, finance and accounting skills and resources
Project Canaan will need to allocate at least 1% of its total capital cost to marketing in
the first 2 years of operation. The marketing department will be composed of qualified
and creative individuals whose versatility aligns with changing consumer needs.
The finance department will be composed of intelligent, academically qualified
persons that have experience and a proven track record of work excellence. Project
Canaan shall use a computerized system which utilizes accounting software, such
as SAGE or MYOB, which will interface well with the HFA accounting software.
International accounting standards shall be used in the department, strengthening the
organization’s credibility.
Production/operations/technical skills and resources
The production process at Project Canaan will be well coordinated in various
fields. Growing of crops will be carried out both in soil and also through the use of
hydroponics. The organization will have well trained operators to run the irrigation
systems involved in hydroponics. There will, on site, be an electrician, an agronomist,
and a crop protection supervisor who have the technical and operational skills
necessary to carry out production processes. These persons will be trained by the
Farm Director who is knowledgeable on the issues. Further training will be sourced
from reputable trainers from Swaziland, South Africa, Kenya and other regions
according to need.
SWOT Analysis
A SWOT analysis is a matrix representation of comparisons of four aspects
concerning the internal and external factors that affect the farm’s prowess. Figure 1.2
represents the SWOT Analysis.
Assets
There are a number of physical assets that will be used to support this project. These
are as represented in the budget under financial analysis. Acquisition of assets will
be a gradual process based on donations and has been planned in phases of three
years and further partitioned in annual quarters.
Analysis of internal skills and resources
Project Canaan has the advantage of board members that are well established in
diverse businesses and collectively bring a robust knowledge in the management
of large projects. The Corporate Project Manager has over 20 years of high level
administrative experience in a very competitive industry and practical experience in
different business settings. He has managed multi-million dollar projects over the past
years that give him an advantage in administering Project Canaan.
Additionally, the Farm Director has a wealth of experience in agriculture, with a
Bachelor of Science in agriculture, a double Masters degree in Finance and Strategic
20
Management and other related courses spanning the past 10 years.
INTERNAL ANALYSIS
SWOT ANALYSIS
PROJECT CANAAN
STRENGTHS
WEAKNESSES
Project Canaan is run by individuals who have been
1
engaged in significantly large businesses enterprises,
and members of the board are from diverse yet
The project requires high capital start up costs.
significant business entities.
The Project Manager has over 20 years wealth of
2
experience in administration of multi-million dollar
projects in leading companies in the Unites States.
There is no similar project in Swaziland that PC can emulate, at
the anticipated scope.
The Farm Director has ‘hands on’ experience in
managing over 400 acres of farm land with hands on
3
experience on hydroponics, fish farming, advanced
irrigation systems, designing and supervision of dams,
There is limited agricultural information on horticulture in
Swaziland from relevant bodies.
among other agronomical and technical issues.
PC will develop the state of the art irrigation, green
4
house, hydroponics, and other farming systems that will
give it a competitive edge in the farming business.
5
Lack of a detailed research and development program that is
designated to explore markets.
There is a clear strategy on the establishment of the
project and difficult for rivals to copy.
There will be a significant cost advantage due to high
6
volumes of produce that will be produced and thus
optimize on economies of scale.
The President, Project Manager and the Farm Director
7
are creative and entrepreneurially alert team of
managers able to manage strategic changes.
8
PC will have several product lines (managed on portfolio
basis), that will diversify it outputs and risks.
Figure 1.2.1
21
INTERNAL ANALYSIS
SWOT ANALYSIS
PROJECT CANAAN
OPPORTUNITIES
1
Seek fast market growth by formulating an integrated
There is increased trend of labour strikes in neighbouring
strategic plan focusing on highly qualified human capital,
South Africa that may affect the labour force in
and aggressive marketing.
Swaziland.
Many large corporations in the United States have
2
incorporated CSR in their manifesto, creating an avenue
for large funding for PC.
There is a large demand for food (vegetables, cereals,
3
milk, meat) in Swaziland that is not met by the current
local suppliers.
The Swaziland government has acknowledged the need
4
THREATS
for more food production and thus an opportunity for
large scale production.
Change in climatic conditions and natural disasters such
as hail, may lead to low production.
Changes in government policies may lead to
unfavourable working climate.
Exchange rate fluctuations may lead to uneven cash
flows.
Expand core business by exploiting new markets
segments that may include partnering with Swazi
5
government, and also other corporate entities to supply
produce in Royal hotels, European Union, USA, Taiwan
There is a likelihood of increase in industry rivals from
both local and foreign entrants due to its lucrative nature.
and other growing economies.
Venture into niche markets (new market segments) for
high quality produce in neighbouring South Africa such
6
as exclusive hotels due to the availability of financially
endowed individuals, corporate and other organizations.
An increase in labour costs due to direct influence from
neighbouring South Africa’s labour strikes on wage
increment.
Establish an Agri-business tour & seminar facility that will
7
generate subsequent income to PC.
Diversify in to new business that is agriculture related
8
such as floriculture, winery and export to foreign,
international markets.
Figure 1.2.2
22
INTERNAL ANALYSIS
Value chain analysis
The term value chain describes a way of looking at a business as a chain of activities
that transform inputs into outputs that customer’s value. Value Chain Analysis (VCA)
is a process of understanding the value creation through examination of primary
activities and support activities in a business set up. The primary activities are
divided into inbound logistics, operations, out-bound logistics, marketing with sales
and service, while support activities include general administration, human resource
management, research, technology, and system development and procurement.
The VCA of different activities within the farm is as represented below:
Infrastructure
Obtain funding to carry out accounting and payroll functions, and perform other administrative tasks
for each activity.
Develop efficient
delivery systems
for propagation
materials,
fingerlings, and
other farm inputs.
planting, spraying,
animal feeding,
irrigation,
structures
maintenance
workers
Facilitate
Formulate
cost effective
production
processes that
farm personnel
high levels
Supervise
of employee
advertising and
motivation and job
sales personnel
satisfaction, with
proper training &
will use.
supervision.
Carry out fish
Carry out
Technology
Development
Transport all
farm inputs using
reliable means.
Carry out
transportation
planting using
of produce
hydroponics, &
using insulated
cage fish farming.
& refrigerated
pond, processing
Use modern
plants, irrigation
selling methods
equipment &
e.g. Online sales
green house
maintenance
trucks.
Purchase farm
machinery,
irrigation system,
Procurement
purchase
Green house
construction
materials.
PRIMARY ACTIVITIES
SUPPORT ACTIVITIES
Human
Resource
Management
Supervise
Transport of high
quality seeds,
tissues cultures,
fish fingerlings,
dairy AI to farm
Inbound
Logistics
Buy seeds and
other materials
procedures
Hire advertising
Buy planting
agency; buy
troughs, growing
for propagation,
(Same as inbound media time in
medium, farm
fish fingerlings,
logistics)
TV, Newspaper
tools for farm
dairy cows and AI
and leading
attendance &
material.
Magazines
maintenance
Conduct efficient
Have product
market research,
traceability
advertise PC
systems that
produce.
cater for customer
Develop PC as a
complains &
brand name that
respond promptly.
is reputable &
Solicit customer
respected.
input on product
Carry out planting
Store farm
using planter &
produce in cold
tractor. Stock fish
rooms to maintain
& dairy.
high quality.
Use GLOBAL
Carry out
–GAP standard
efficient delivery
to create check
of produce by
& balances in
refrigerated
operations
trucks.
Operations
Outbound
improvement
Marketing/ Sales
Service
Logistics
23
INTERNAL ANALYSIS
P
roject Canaan will focus on four geographical markets, Southern Africa, Europe,
Asia and America, where products of specified segments will be dealt with. The main
products will be fresh vegetables, fruits, milk and fish.
The highest priority consumer of these products will be the children residing in the
HFA-sponsored children’s homes. Other consumers will be largely supermarkets and
hotels with high capacities to maintain continuous purchase at competitive prices.
Strategy identification – major strategies include:
1. Use technological and innovation capabilities to develop and expand
our core businesses
2. Make use of financial and natural resources, core competencies and
competitive capabilities to widen market segments.
3. Exploit varied market segments to reduce the rising labor cost in the
region.
4. Develop marketing skills to take advantage of the fast market growth.
5. Develop R & D to exploit new markets.
6. Maintain a distinctive strategy that is hard for rivals to copy in order
to reduce domestic and foreign competition.
7. Improve on the organization’s systems in order to keep costs down.
8. Clarify corporate direction to reduce negative economic factors.
9. Develop reliable distribution channels so as to reduce our cost.
Development of strategies to achieve objectives
Out of the above strategies, we then proceed in selecting the viable
tactics which will enable us to achieve our objectives fully. The
following are the major tactics which have been selected for proposal
to the management:
1.
Use technological and innovation capabilities to expand our core businesses. The key
results areas here are innovation and high quality products. Technology will assist
in achieving this. The adaptation of state of the art hydroponics systems will enable
the project to have a competitive edge over its producers. It will be a key strength
that may facilitate an exponential growth in production, product quality and profit
margins. Fish farming in cages as opposed to normal ponds is a technology that will
help in meeting the income targets.
2.
Make use of our resources, core competencies and competitive capabilities to widen
new market segments. These will give the business a competitive advantage over the
competitors. The business will commit its resources in the key operation areas for
24
better results.
INTERNAL ANALYSIS
3.
Exploit different market segments to reduce the rising labor cost in the region. The
horticulture and fish business has unexploited markets, hence this strategy will
enable the business to identify these markets, to determine their needs and then to
come up with the needed products. As the business enjoys economies of scale, the
marginal cost per unit will be reduced resulting in a reduction in the cost of labor and
other costs. Labor costs in Southern Africa are steadily rising and have clearly been
influenced by the industrial strikes in SA over the past months. How and or when this
will effect Swaziland is uncertain.
4.
Develop marketing skills to take advantage of the fast market growth. In order for the
business to expand, promotion and marketing will need to be done aggressively. This
strategy will lead to market growth, and hence, more customers, increased profit and
value creation, which will lead to increased rate of return to shareholders.
5.
Maintain a distinctive strategy that is hard for rivals to copy in order to reduce
domestic and foreign competition.
Key targets – key performance targets include:
1. Have a fully operational fish farming, outdoor farming and
hydroponics system in three years.
2. Earn net profit of $812,262 from fish farming after the first year of
project completion.
3. Earn annual net profit of $802,309 from crop cultivation and the sale
of vegetables farming 90 acres, by the 5th year.
4. Increase revenue by 5% per annum.
5. Reduce costs by 5% per annum.
6. Venture into other products such as mushroom, grapes, olives, fruit
tree farming, milk and milk products through dairy farming that are
not part of the short term business plan, after careful analysis.
7. Employ up to 800 people by the third year of operation.
Persons responsible
Line managers will eventually be responsible for each of the operations. During
the first year of the project, the Corporate Project Manager and Farm Director will
be directly responsible for most activities within Project Canaan. Thereafter, with
direction from the Project Director, each line manager will be given targets to achieve,
and this will be reviewed on a monthly basis. For the managers to achieve their
targets, they will need to be supported, empowered and be held accountable and
responsible for their functions. Those who excel will be rewarded accordingly.
25
INTERNAL ANALYSIS
Formulation of Strategic Objectives
1
Strategic Objective
Strategy
Justification
Performance
Indicators
Person responsible
Establish 36 hectares
of outdoor vegetable
and cereal farming.
Establish 36 hectares
of outdoor vegetable
and cereal farming.
Is the most efficient
way to be able to
achieve the target
a) Measure planted
area in acreage.
b) Farm records of
work activities.
Project Manager
together with Farm
Director
2
Establish 26 fish farms
to produce fish all year
round.
Construct fish ponds
of required dimensions
and stock them.
Is the most practical
way to achieve target
a) Carry out a site audit to assess presence
of ponds
b) Carry out sampling
at the fish ponds to
assess presence &
numbers of fish.
Project Manager
together with Farm
Director
3
Produce 520 tons
annually of exportable
fish by 2012
Build modern fish cage
ponds with proper
aeration, and a processing unit to handle
produce.
High produce requires
large processing facility that is HACCAP
certified.
a) Presence of 26
cage ponds stocked at
densities of 50 fish per
cubic metre.
b) Presence of a
HACCAP certified
processing plant
Farm Director in association with the Project
Manager
4
Produce 576 tons of
exportable vegetables
annually, from the 36
hectares of farm land
by the year 2012.
Establish an elaborate
& efficient irrigation
mechanisms, hydroponics system, with
supporting infrastructure that include a
sorting facility with cold
rooms, refrigerated
tracks for transportation of fresh produce.
To facilitate high production and maintenance of high quality
vegetables.
a) Measure amount
of produced annually
through farm record.
b) Carry out an assessment of presence
of required infrastructure.
Farm Director
in association with the
Project Manager
5
Project Canaan to
be a respectable &
reputable brand name
in Southern Africa by
2014.
Have systematic, internationally accredited
procedures to offer
consumers high quality
products, & aggressive
marketing and sales
activities.
Consumer satisfaction,
product knowledge &
internationally accredited procedures
are directly related
to development of a
brand name.
a) Amount of products
demanded
b) Percentage of
produce rejected by
consumers.
c) Recognition by consumer or media as a
leading market player
in industry.
Marketing officer in
association with the
Project Manager &
Farm Director
6
To directly encourage
activities that prevents
soil erosion.
Plant trees, carry
out soil conservation
trainings to all farm
employees
Soil conservation facilitates better environmental conservation.
a) Number of successful trainings carried out
b) Number of soil
conservation structures such as terraces,
gabions constructed
c) Number of trees
planted within a year.
Farm Director with environment supervisor.
26
INTERNAL ANALYSIS
Major risks and countermeasures
The major risks to this business are: climatic changes like drought, government
policies, human activities, diseases, foreign currency fluctuations, technology etc. The
management will have to be alert to identify and group these measure risks and will
come up with ways of mitigating the risks where possible.
The major risks to this business are as follows:
1. Climatic changes
Changes in climate may have adverse implication on the project especially when
drought is experienced. This will imply lower precipitation and, therefore, inadequate
water supply for crops, less water availability for fish farming and even adverse
effects on milk production. To counter this risk, Project Canaan will invest in large
water reservoirs within its property that will facilitate significant rain water harvesting
that is sufficient for the project. Secondly, there are boreholes already drilled to
provide sub-surface water, especially for domestic and animal use. Thirdly, an
environmental conservation program, where trees will be planted to create a water
catchment, will be established.
2. Natural disasters
The area in which the farm is located is prone to frequent bush fires. This is a risk
that may cause a high amount of damage. Workers will be trained in fire fighting
techniques and equipped with water tankers known as “bowsers.” Project Canaan
personnel will assist neighbors in fire fighting and receive reciprocal assistance from
its neighbors. This is already the accepted practice in the area. Counter measures
have been taken to create fire breaks throughout the farm.
There may be disease outbreaks that could cause serious harm to the crops. To
counter this, Integrated Pest Management (IPM) shall be used so as to control both
pests and diseases using biological, chemical and field hygiene practices.
3. Exchange rate risk
The volatility of cash flow of the project may be determined by the currency in which
trading of produce is carried out. It should be noted that exchange rate fluctuations do
not necessarily imply adverse cash flow variance. To counter this, the base currency
that will be used to trade, especially with international markets has to be that which
is not experiencing frequent and adverse fluctuations. Hedging of monies should be
done using appropriate instruments which the Corporate Project Manager will approve.
4. Country risk
This risk is a combination of potential governmental or state related risks, which
include changes in government policies, introduction of taxes on non-for profit
organizations, increase of value added taxes and importation restrictions. (There is
presently no property taxation on farms in Swaziland.) This conglomerate of risks
can only be anticipated and appropriate counter measures carried out, which in most
cases would not be controllable by Project Canaan.
The management will have to be alert to identify and group these probable risks and
come up with ways of mitigating the risks where possible.
27
PROJECT IMPLICATIONS
The economic impact identified includes the proposed employment in Project Canaan’s farm among other things as elaborated below;
Economic Factors
1. Employment
Project Canaan will create employment for a wide range of people within Swaziland
and also outside of the country. There will be the management team, the supervision
team, and the general work force that will work directly on the farm.
A second category of employment will be created outside the farm, which includes;
Government inspection personnel for phyto-sanitation of products, the export clearing
personnel, the retail market dealers within Swaziland, the export handling personnel
within Swaziland and those that are outside of Swaziland.
Ideally, there will be approximately one hundred people employed in the first year
of Project Canaan’s inception, and the numbers are expected to triple in the second
year and be maintained at that level. By the third year of operation, Project Canaan
hopes to employ eight hundred people in both permanent and casual positions.
2. Improved household welfare
The project’s employees will support their households, relatives, friends and businesses, triggering improved living standards. The unemployment rate in the region
currently is very serious that the one hundred employee figure is very significant.
According to statistics provided by IFAD, the unemployment rate is about 70% in the
rural areas. This generally implies that the support ratio for every employed person is
one to three.
Assuming a conservative composition of four children per family, Project Canaan will
therefore be directly supporting approximately seven thousand, two hundred (7200)
children, women and men through the employment of eight hundred people in the
third year of operation.
3. Trade
The enhanced purchasing power of the employees will support the small service
businesses near their places of residence and work. The vegetable and fruit hawkers,
shopkeepers, tailors, barbers, hairdressers, home technicians, market vendors and
many other people will benefit from these workers.
Social Implications
1. Food provision
Project Canaan’s proposed farming activities that include vegetables and fruit production, fish farming and dairy, will provide a food industry that will adequately provide
nutrients source of vitamins, proteins, carbohydrate improving health and food security at the farm itself, the community, the children’s homes supported by HFA and to
the consumers from all the regions that are going to purchase farm products.
28
PROJECT IMPLICATIONS
2. Area development
The area around Project Canaan will develop due to increased disposable income
from employment at the farm. This will trigger more beneficial spending in the local
area. This will lead to development of support infrastructure and activities as small
holder businesses are set up to offer goods and services to the population employed
at Project Canaan and their dependants.
3. Environmental implications
Reduction of harmful effects caused by soil effusion, desertification, and depletion
of watersheds will be planned out in the day to day activity plan of the farm. It will
improve the area’s aesthetic look through the increase of plant cover. The proposed
project will assist in the creation of the area micro-climate that is expected to increase
precipitation, improve on the area humidity and irregular temperatures experienced.
This phenomenon will minimally help in the management of global warming experienced all over the world.
4. Biomass energy
The establishment of the fast growing trees will help in the provision of wood and
charcoal fuel at Project Canaan and at all sites where the trees will be transplanted
across the country. The biomass energy production will thereby benefit the environment and increase its sustainability while conserving the environment.
5. Air quality
The proposed project will help in the improvement of air quality. The numerous plants
and trees will have the capacity of filtering gases that are detrimental to other forms
of lives once they exceed the recommended concentrations. These gases are essential to the biological processes of the trees hence reducing their concentration to the
environment, for example carbon dioxide.
6. Biological diversity
The abundance of micro and macro organisms will be enhanced by the establishment
of the proposed project. The planting of vegetables, fruits and trees will help in the
creation of an ecosystem for several organisms. Pollination insects, soil barrowing
organisms, will increase in numbers. This will assist in the enrichment of the area
biological diversity.
29
FINANCIAL ANALYSIS
The associated financial plan has been created to identify the total quantity of funds
required to undertake each phase at Project Canaan, in other words, the budget. The
total cost of labor, equipment and materials is calculated and an expense schedule
is defined which will enable the project manager to measure the forecast spending
versus the actual spending throughout the project. This detailed financial planning
process is an extremely important activity within this project, as the different components will expect the final solution to have been delivered within the allocated budget.
The level of resource required in undertaking each of the activities and tasks listed
within the project plan have been indicated within the budgets stated below. Some
generic resources have already been allocated in the project plan.
The following are the budgets that have been calculated within this financial plan:
1. Project Budget Design Overview
This is the grand budget of all assets that will be required for the project. It lists down all
the assets and some inputs that will enable the establishment and success of the project.
The budget is sub-divided into three phases. It is important to have the project in
phases to spread risk and investment capital. A detailed budget has been developed
and attached. This budget has been referred to as ‘Project Canaan Budget’. The total
budget is $ 13,714,952.
2. Corn Production
This budget is for the first year of production and it represents farming in 12 hectares
of the 36 hectares that are to be farmed. (See Appendix)
3. Fish production
The analysis of fish production has also been categorized into two with a third part
indicating the cash flow from one of the production methods.
a. Normal stocking is when fish are reared in open ponds at normal population of about
five fish per cubic meter. The total exportable quantity is 80,000 kilograms, while
the income expected is $62,600 per annum, with profitability per kilogram of $0.78.
(Figure 3.1)
b. Caged farming is where fish will be reared in cages at higher stocking rate of up to
50 fish per cubic meter. The total exportable quantity is 520,000 kilograms, while
the income expected is $812,262 per annum, with profitability per kilogram of $1.56.
(Figure 3.2)
c. A cash flow extrapolated from cage farming has been carried out through a period of
5 years. The cumulative cash flow is $4,122,081.38. A break-even point of 1 year, 6
months has been projected. (Figure 3.3)
30
FINANCIAL ANALYSIS
Fish Production: COST AND PROFITABILITY ANALYSIS
2,500,000
2,000,000
Amount in $
1,500,000
1,000,000
500,000
0
Year 1
Year 2
Year 3
Year 4
Year 5
Graph 3.3
LEGEND
Depreciation
NIAT
NIBT
IBDT
Taxes @ 30%
Depreciation
Expenses (excluding depreciation)
Revenue
Total cash inflow
$4,122,081.38
Total Project Cost
$1,212,766.40
Break even point on Investment
1 year, 6 months
Abbreviations
IBDT - Income Before Depreciation and Taxes
NIBT - Net Income Before Taxes
NIAT - Net Income After Taxes
Note 1
Depreciation of specific assets is as stated below: 2
Machinery & equipment 12% 3
Motor vehice 25% 4
Water supply 12.5% 5
Land & buildings Nil 6
The tax on non-profit making organization may be applied at 0%, and 30% for profit organizations
7
A 5% annual increase in revenue and 5% decrease in expenses is expected.
8
The value of depreciasion will be dependent on the assets invested.
31
FINANCIAL ANALYSIS
4. Vegetables French beans production
The French beans stated production is a representation of production of high yielding
vegetables with similar pricing regimes. This analysis comes in three parts;
a. Unpacked produce, which will be sold in open crates with no value added processes
carried out within the farm. The expected produce is 576,000 kg for export, earning
$220,378 per annum with a profitability of $0.38 per every kilogram sold. (Figure 3.4)
b. Packed produce, which will be sold in different sizes of pallets (e.g. 250 grams,
500grams) which is a value added processes carried out within the farm. The expected produce is 576,000 kg for export, earning $913,328 per annum with a profitability
of $1.59 per every kilogram sold. (Figure 3.5)
c. A cash flow of packed produce has been carried out through a period of 5 years.
The cumulative cash flow is $3,658,699.62. A break-even point of 2 years has been
projected. (Figure 3.6)
32
FINANCIAL ANALYSIS
Cash Inflows for vegetable production
2,500,000
2,000,000
Amount in $
1,500,000
1,000,000
500,000
0
Year 1
Year 2
Year 3
Year 4
Year 5
Graph 3.6
LEGEND
Depreciation
NIAT
NIBT
IBDT
Taxes @ 30%
Depreciation
Expenses (excluding depreciation)
Revenue
1
Total cash inflow
$3,658,699.62
Total Project Cost
$1,470,738.00
Break even point on Investment
2 years
Abbreviations
IBDT - Income Before Depreciation and Taxes
NIBT - Net Income Before Taxes
NIAT - Net Income After Taxes
Note Depreciation of specific assets is as stated below: 1.1
Machinery & equipment 12% 1.2
Motor vehice 25%
1.3
Water supply 12.5%
1.4
Land & buildings Nil
2
The tax on non-profit making organization can be applied at 0% and 30% for profit making corporations
3
A 5% annual increase in revenue and expenses is predicted
4
A 5% annual decrease in expenses is expected
33
STRATEGIC CONTROL
Reporting requirements
Reporting of the project will be required on quarterly basis. The main aspects of
reporting are to be focused on the objectives of the project, project progress and
potential strategic changes that need to be adopted in the medium term.
Reporting will be in two forms, narrative reports, and financial reports that will be
presented in both written and oral means.
Review process and period
Review of project progress and performance will be carried out on quarterly basis. The
fiscal year will begin 1st of October and end 30th of September each year. The reviews will
therefore be carried out on the first week of January, April, July and October.
The reviews will include the Board of Directors and the Farm Director. The process
will involve an overview of activities, figures of sales and revenues and direction of
progress of Project Canaan. Review may be carried out on round table basis or
through suitable long distance communications, though there is greater need for face
to face briefing to avoid cross-purpose and facilitate clear reporting and direct inquiries of the reports.
34
INVESTMENT OPPORTUNITIES
Project Canaan Investment Opportunity #1
36 hectares (90 acres) of Unpackaged Vegetables in 2010
Project Canaan wishes to plant, harvest and sell 90 acres of outdoor production
unpackaged vegetables in 2010. This project will cost $475,000 to operate and is expected to yield 8, 760 kg of food for our orphans and vulnerable children, 576,000 kg
for sale locally and an additional $220,000 US in profits to be used to handle ongoing
expenses in the homes and on the farm.
Project Canaan Investment Opportunity #2
36 hectares (90 acres) of Packaged Vegetables in 2011
Project Canaan wishes to plant, harvest and sell 90 acres of outdoor production
packaged vegetables in 2010. This project will cost $1,109,680 to operate and is
expected to yield 8, 760 kg of food for our orphans and vulnerable children, 576,000
kg for export and an additional $913,000 US in profits to be used to handle ongoing
expenses in the homes and on the farm.
Project Canaan Investment Opportunity #3
26 Ponds of Fish Farming in 2010
Project Canaan wishes to build 26 ponds of 1600 sm each to grow, harvest and sell
fish locally. This project will cost $250,000 to operate and is expected to produce
1950 kg of a significant, high protein food source for our orphans and vulnerable
children, 80,000 kg to sell locally and abroad, and additionally to net $63,000 US in
profits to be used to handle ongoing expenses in the homes and on the farm.
Project Canaan Investment Opportunity #4
26 Ponds of Cage Fish Farming in 2011
Project Canaan wishes to utilize the previously built 26 ponds of 1600 sm each
to grow, harvest and sell fish using a cage fishing format. This project will cost
$1,144,000 to operate and is expected to produce 8,760 kg of a significant, high
protein food source for our orphans and vulnerable children, 520,000 kg to sell locally and abroad, and additionally to net $812,262 US in profits to be used to handle
ongoing expenses in the homes and on the farm.
35
INVESTMENT OPPORTUNITIES
Capital Cost For Donor Assistance
Small Nursery Greenhouse
$8,064.00
Outside Showers (volunteers and chem. sprayers)
Farm tools
Welding machine
Bench + vice
Clamps
Compressors
Levers
Pry bars
Miscellaneous tools
Weather station
Weather station
Fire Bowzer to move water around
Booster water pump
Total Farm tools:
$3,360.00
$896.00
$504.00
$280.00
$952.00
$168.00
$336.00
$784.00
$5,600.00
$5,600.00
$1,120.00
$560.00
Irrigation Equipment
Pump house & fertilizer storage building
Pumps & Ancillary equipment
Piping underground main & sub lines
Drip lines for 90 acres or
Overhead sprinklers
Connectors and components
Total Irrigation Equipment
Fish Farming
Pond Construction 1600 sm x 26 ponds
Processing Plant (pre-fab processing room), includes
freezing equipment
Outer structure for Processing Plant, includes epoxy
flooring
Waste handling tank to clean effluent
Oxygenating pump & equipment for ponds
Fingerling Hatchery
Mechanized Fish cages and supports
Fish nets
Total Fish Farming:
$56,000.00
$235,200.00
$145,600.00
$120,960.00
$89,600.00
$28,000.00
$153,440.00
$134,400.00
$12,320.00
$17,808.00
$42,560.00
$117,264.00
$4,368.00
36
$494,928.00
$52,640.00
$59,696.00
$63,840.00
$147,840.00
$324,016.00
Office Equipment
Satellite dish for internet/data/voice connectivity
Desktop computers/printers (2 each)
Laptop
Fax machine
Router
Walkie talkies 3 pairs
Stationery
Total Office Equipment:
$8,960.00
$4,480.00
$2,016.00
$1,120.00
$336.00
$896.00
$448.00
Odds and ends
Knapsack Sprayers
Protective clothing for sprayers
Work clothing for employees
Total Odds and ends:
$2,688.00
$1,792.00
$4,480.00
Dams
26 million gallon dam
13 million gallon dam
23 million gallon cofferdam
Water recycling dam
Pipe works from main dam to reservoir
Total Dams:
$829,360.00
$548,800.00
20x60=1200
Vehicles
4x4 Flat bed truck
3 ton refrigerated vegetable truck
3 ton refrigerated fish truck
9 tone refrigerated track
Total Vehicles:
$675,360.00
$347,200.00
Green Houses per 1 hectare/2.47 acres (includes labor)
Food Processing House/Offices
$16,800.00
$403,200.00
$212,800.00
$78,400.00
$44,800.00
$44,800.00
$18,256.00
$8,960.00
$784,000.00
APPENDIX
APPENDIX
37
200
Personnel Costs
SWAZILAND
44,800
44,800
5,538
8,688
10,964
3,944
4,467
3,407
7,613
4,603
3,124
56,024
5,966
203,936
56,000
0
67,200
403,200
212,800
44,800
44,800
828,800
235,200
120,960
145,600
28,000
529,760
202 Earth Dams
Enlargement of Van Wyk Dam 1
Enlargement of Van Wyk Dam 2
Dam 1 (300 million litres)
Dam 2 (100 million litres)
Dam 3 (50 million litres)
Water recycling dam
Pipe works from main dam to reservoir
Subtotal
203 Out-door drip irrigation (90 acres)
Main control Head, pumps, filters
Drip lines
Main and submainlines
Connectors and accessories
Subtotal
2,198,022
17,472
6,552
15,288
21,840
61,152
28,896
18,368
139,776
8,960
11,962
1,928,909
2,136,870
3 Years
TOTAL
BUDGET
$US
$=
ZAR 7.50
Assets
201 Farm Machinery
75 HP tractor 4x4 wet clutch
76 HP tractor 4x4 wet clutch
Slasher / bush hog
Two Row Seed Planter
5 ton tipper wagon
Deep row ridger
Farm security fence
3 Disc Torpedo Plow
Subsoiler/Pan Knife
Bed shaper/ rotavator
Offset Disc Harrow
150 KVA Generator
Boom Sprayer
Subtotal
Non Personnel Inputs
Total Personnel Costs
102 Travel Costs (Marketing)
Air fare
Accomodation
Local Transport
Others (Incidentals, perdiems)
Subtotal Travel Costs
Senior Supervisor
Farm accountant
Farm supervisors
Tractor driver
Mechanic
Farm Labour
Subtotals
101 In Country Staff Salary
Activity
KALELI MULLI
PROJECT CANAAN
Project Activity Costs
Prepared By:
Project:
Assumed Exchange rate
Heart For Africa
Life Time Quarterly Budget
235,200
120,960
145,600
28,000
529,760
56,000
0
67,200
0
0
0
44,800
168,000
44,800
44,800
5,538
8,688
10,964
3,944
4,467
3,407
7,613
4,603
3,124
22,984
5,966
170,896
223,485
1,344
504
1,176
1,680
4,704
9,408
0
26,880
2,240
3,024
177,229
218,781
Year 1
Oct-09
Sep-10
0
0
0
0
0
56,000
0
0
0
0
0
0
56,000
44,800
44,800
5,538
8,688
10,964
3,944
4,467
3,407
7,613
4,603
3,124
22,984
5,966
170,896
0
0
0
0
0
2,352
0
6,720
560
756
12,902
23,290
Q1
123,200
64,960
78,400
16,800
283,360
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,352
0
6,720
560
756
25,805
36,193
Q2
56,000
28,000
33,600
5,600
123,200
0
0
67,200
0
0
0
0
67,200
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,352
0
6,720
560
756
51,610
61,998
Q3
Quarterly Budget
56,000
28,000
33,600
5,600
123,200
0
0
0
0
0
0
44,800
44,800
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,344
504
1,176
1,680
4,704
2,352
0
6,720
560
756
86,912
97,300
Q4
0
0
0
0
0
0
0
0
403,200
212,800
44,800
0
660,800
0
0
0
0
0
0
0
0
0
0
0
33,040
0
33,040
645,232
8,064
3,024
7,056
10,080
28,224
9,632
8,960
53,760
2,240
3,024
539,392
617,008
Year 2
Oct-10
Sep-11
0
0
0
0
0
0
0
0
179,200
100,800
44,800
0
324,800
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,016
756
1,764
2,520
7,056
2,408
2,240
13,440
560
756
134,848
154,252
Q1
0
0
0
0
0
0
0
0
112,000
56,000
0
0
168,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,016
756
1,764
2,520
7,056
2,408
2,240
13,440
560
756
134,848
154,252
Q2
0
0
0
0
0
0
0
0
112,000
56,000
0
0
168,000
0
0
0
0
0
0
0
0
0
0
0
33,040
0
33,040
2,016
756
1,764
2,520
7,056
2,408
2,240
13,440
560
756
134,848
154,252
Q3
Quarterly Budget
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,016
756
1,764
2,520
7,056
2,408
2,240
13,440
560
756
134,848
154,252
Q4
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,329,306
8,064
3,024
7,056
10,080
28,224
9,856
9,408
59,136
4,480
5,914
1,212,288
1,301,082
Year 3
Oct-11
Sep-12
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,016
756
1,764
2,520
7,056
2,464
2,352
14,784
1,120
1,478
269,696
291,894
Q1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,016
756
1,764
2,520
7,056
2,464
2,352
14,784
1,120
1,478
269,696
291,894
Q2
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,016
756
1,764
2,520
7,056
2,464
2,352
14,784
1,120
1,478
269,696
291,894
Q3
Quarterly Budget
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,016
756
1,764
2,520
7,056
2,464
2,352
14,784
1,120
1,478
403,200
425,398
Q4
KALELI MULLI
PROJECT CANAAN
SWAZILAND
209 Transportation
4 wheel pick up track
3 tonne refrigerated vegetables track
3 tonne refrigerated fish track
9 tonne refrigerated track
Road transport fuel
Freight
Subtotal
52,640
59,696
63,840
147,840
227,472
924,336
1,475,824
11,200
11,200
120,960
409,833
530,793
207 Security
Fencing/security around first farming area
Perimeter fencing of entire property
Subtotal
208 Weather station
Structures and equipment
Subtotal
148,960
156,800
11,312
15,456
106,400
56,000
6,496
501,424
1,352,960
136,192
414,400
23,296
434,560
1,066,240
24,080
18,816
112,000
30,240
145,600
174,720
7,840
143,360
21,280
66,080
4,171,664
347,200
153,440
134,400
12,320
17,808
7,000
42,560
117,264
245,207
4,368
1,081,567
3 Years
TOTAL
BUDGET
$US
$=
ZAR 7.50
206 Food Processing & Parking Area
Outer steel structure with roofing
Sorting and pack house prefabrication & cold room
Stainless steel tables
Weighing scales
Offices and farm store
Pump house and fertilizer store
Outer skirting and paving
Subtotal
205 Green Houses (20 acres)
Green house structure
Green house cover
Irrigation system
Skirting material
Shading screen for green house
Fan & pad system for control and heating
Electricity & switchboards inside GH
Electricty supply
Irrigation/fertigation/control system
Growing material support
Planting trouphs
Planting media
Indoor climate data log analyser
Ground leveling and grading
Ground water storage tank (1,000,000 L)
Rain water collection and drainage
Subtotal
Project Activity Costs
204 Fish Farming
Fish Ponds construction
Fish Processing plant
Outer structure and roofing
Waste hundling area
Oxyginating pumps and equipment
Fingerlings
Fingerlings Hatchery
Mechanized Fish cages and supports
Fish feeds
Fishing nets
Subtotal
Prepared By:
Project:
Assumed Exchange rate
Heart For Africa
Life Time Quarterly Budget
52,640
59,696
0
0
7,056
58,800
178,192
11,200
11,200
120,960
0
120,960
148,960
117,600
11,312
15,456
106,400
56,000
6,496
462,224
0
0
0
0
0
0
0
0
0
0
0
0
0
143,360
0
0
143,360
173,600
78,400
67,200
0
0
3,360
0
0
7,907
4,368
334,835
Year 1
Oct-09
Sep-10
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3,920
0
3,920
5,600
5,600
Q1
52,640
0
0
0
784
0
53,424
5,600
5,600
40,320
0
40,320
50,400
39,200
0
0
0
0
0
89,600
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
57,867
0
0
0
0
0
0
0
0
0
57,867
Q2
0
59,696
0
0
784
0
60,480
0
0
40,320
0
40,320
49,280
39,200
11,312
15,456
67,200
56,000
0
238,448
0
0
0
0
0
0
0
0
0
0
0
0
0
67,200
0
0
67,200
57,867
39,200
0
0
0
1,680
0
0
0
4,368
103,115
Q3
Quarterly Budget
0
0
0
0
1,568
58,800
60,368
0
0
40,320
0
40,320
49,280
39,200
0
0
39,200
0
6,496
134,176
0
0
0
0
0
0
0
0
0
0
0
0
0
76,160
0
0
76,160
57,866
39,200
67,200
0
0
1,680
0
0
7,907
0
173,853
Q4
0
0
63,840
147,840
110,208
404,544
726,432
0
0
0
409,833
409,833
0
39,200
0
0
0
0
0
39,200
676,480
68,096
207,200
11,648
217,280
533,120
24,080
18,816
112,000
30,240
145,600
87,360
3,920
0
21,280
33,600
2,190,720
173,600
75,040
67,200
12,320
17,808
3,640
42,560
117,264
110,740
0
620,172
Year 2
Oct-10
Sep-11
0
0
63,840
0
27,552
58,800
150,192
0
0
0
102,459
102,459
0
39,200
0
0
0
0
0
39,200
169,120
17,024
51,800
2,912
54,320
133,280
0
0
0
0
36,400
21,840
0
0
0
5,600
492,296
57,867
39,200
33,600
0
8,904
1,680
11,200
33,600
15,820
0
201,871
Q1
0
0
0
0
27,552
115,248
142,800
0
0
0
102,459
102,459
0
0
0
0
0
0
0
0
169,120
17,024
51,800
2,912
54,320
133,280
0
0
0
0
36,400
21,840
0
0
11,200
11,200
509,096
57,867
35,840
33,600
12,320
8,904
1,960
11,200
28,000
31,640
0
221,331
Q2
0
0
0
0
27,552
115,248
142,800
0
0
0
102,458
102,458
0
0
0
0
0
0
0
0
169,120
17,024
51,800
2,912
54,320
133,280
12,880
18,816
56,000
19,040
36,400
21,840
3,920
0
10,080
11,200
618,632
57,866
0
0
0
0
0
11,200
28,000
31,640
0
128,706
Q3
Quarterly Budget
0
0
0
147,840
27,552
115,248
290,640
0
0
0
102,458
102,458
0
0
0
0
0
0
0
0
169,120
17,024
51,800
2,912
54,320
133,280
11,200
0
56,000
11,200
36,400
21,840
0
0
0
5,600
570,696
0
0
0
0
0
0
8,960
27,664
31,640
0
68,264
Q4
0
0
0
0
110,208
460,992
110,208
0
0
0
0
0
0
0
0
0
0
0
0
0
676,480
68,096
207,200
11,648
217,280
533,120
0
0
0
0
0
87,360
3,920
0
0
32,480
1,837,584
0
0
0
0
0
0
0
0
126,560
0
126,560
Year 3
Oct-11
Sep-12
0
0
0
0
27,552
115,248
142,800
0
0
0
0
0
0
0
0
0
0
0
0
0
169,120
17,024
51,800
2,912
54,320
133,280
0
0
0
0
0
21,840
0
0
0
5,600
455,896
0
0
0
0
0
0
0
0
31,640
0
31,640
Q1
0
0
0
0
27,552
115,248
142,800
0
0
0
0
0
0
0
0
0
0
0
0
0
169,120
17,024
51,800
2,912
54,320
133,280
0
0
0
0
0
21,840
0
0
0
11,200
461,496
0
0
0
0
0
0
0
0
31,640
0
31,640
Q2
0
0
0
0
27,552
115,248
142,800
0
0
0
0
0
0
0
0
0
0
0
0
0
169,120
17,024
51,800
2,912
54,320
133,280
0
0
0
0
0
21,840
3,920
0
0
11,200
465,416
0
0
0
0
0
0
0
0
31,640
0
31,640
Q3
Quarterly Budget
0
0
0
0
27,552
115,248
142,800
0
0
0
0
0
0
0
0
0
0
0
0
0
169,120
17,024
51,800
2,912
54,320
133,280
0
0
0
0
0
21,840
0
0
0
4,480
454,776
0
0
0
0
0
0
0
0
31,640
0
31,640
Q4
SWAZILAND
232,680
160,955
185,640
936,096
1,515,371
6,720
6,720
9,072
3,517
9,520
3,360
25,469
225 Farm inputs - Non Assets
Seeds
Fertilizers
Crop Protection Products
Packaging material
Subtotal
230 Community Training
Good agricultural practices
Subtotal
231 Staff Training
Global-GAP Standards
HACCAP
Environmental Impact Assessment
BSCI
Subtotal Training Cost
6,272
2,688
15,680
30,240
3,584
13,440
66,080
12,544
68,320
218,848
220 Other Assets
Spraying boom
Knapsack sprayers
Generator strong room
40 feet storage containers & hosting
Protection clothing for sprayers
Work clothing for employees
Water treatment equipment & machinery
Office furniture
Kitchen and roofed eating area
Subtotal
3 Years
TOTAL
BUDGET
$US
$=
ZAR 7.50
8,848
3,360
2,016
336
6,720
896
14,314
36,490
KALELI MULLI
PROJECT CANAAN
Project Activity Costs
210 Office & Communication equipment
Satellite-internet communication network
Desktop computers
Laptop
Router
Intercome telephoney
Radio call
Stationary
Subtotal
Prepared By:
Project:
Assumed Exchange rate
Heart For Africa
Life Time Quarterly Budget
2,240
0
4,760
1,120
8,120
1,120
1,120
40,040
44,475
26,600
84,000
195,115
0
2,688
15,680
10,080
1,792
4,480
0
3,136
68,320
106,176
8,848
3,360
2,016
336
0
448
3,114
18,122
Year 1
Oct-09
Sep-10
560
0
4,760
560
5,880
0
0
5,320
10,494
2,240
0
18,054
0
2,688
15,680
5,040
0
4,480
0
3,136
0
31,024
8,848
3,360
2,016
336
0
448
437
15,445
Q1
560
0
0
0
560
0
0
5,320
10,494
2,240
0
18,054
0
0
0
5,040
1,792
0
0
0
0
6,832
0
0
0
0
0
0
437
437
560
0
0
560
1,120
0
0
5,320
10,494
2,240
0
18,054
0
0
0
0
0
0
0
0
68,320
68,320
0
0
0
0
0
0
1,120
1,120
Q3
Quarterly Budget
Q2
560
0
0
0
560
1,120
1,120
24,080
12,992
19,880
84,000
140,952
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,120
1,120
Q4
4,480
1,680
4,760
2,240
13,160
2,800
2,800
96,320
51,968
79,520
426,048
653,856
6,272
0
0
20,160
1,792
8,960
66,080
9,408
0
112,672
0
0
0
0
6,720
448
4,480
11,648
Year 2
Oct-10
Sep-11
2,240
1,120
4,760
1,120
9,240
0
0
24,080
12,992
19,880
106,512
163,464
6,272
0
0
5,040
1,792
8,960
66,080
0
0
88,144
0
0
0
0
0
448
1,120
1,568
Q1
560
0
0
0
560
0
0
24,080
12,992
19,880
106,512
163,464
0
0
0
5,040
0
0
0
9,408
0
14,448
0
0
0
0
6,720
0
1,120
7,840
560
560
0
1,120
2,240
0
0
24,080
12,992
19,880
106,512
163,464
0
0
0
5,040
0
0
0
0
0
5,040
0
0
0
0
0
0
1,120
1,120
Q3
Quarterly Budget
Q2
1,120
0
0
0
1,120
2,800
2,800
24,080
12,992
19,880
106,512
163,464
0
0
0
5,040
0
0
0
0
0
5,040
0
0
0
0
0
0
1,120
1,120
Q4
2,352
1,837
0
0
4,189
2,800
2,800
96,320
64,512
79,520
426,048
666,400
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6,720
6,720
Year 3
Oct-11
Sep-12
1,120
1,277
0
0
2,397
0
0
24,080
16,128
19,880
106,512
166,600
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,680
1,680
Q1
0
0
0
0
0
0
0
24,080
16,128
19,880
106,512
166,600
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,680
1,680
1,232
560
0
0
1,792
0
0
24,080
16,128
19,880
106,512
166,600
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,680
1,680
Q3
Quarterly Budget
Q2
0
0
0
0
0
2,800
2,800
24,080
16,128
19,880
106,512
166,600
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,680
1,680
Q4
KALELI MULLI
PROJECT CANAAN
SWAZILAND
ZAR 102,862,141
13,714,952
$
Country Costs ($)
13,714,952
Total Cost
Summary in Rands (R):
Country Costs
11,516,930
16,128
32,256
286,720
1,064
2,800
0
3,136
5,040
31,920
379,064
3 Years
TOTAL
BUDGET
$US
$=
ZAR 7.50
Total Non-Personnel
Installation of computers, networking, telephones, intercom system
Land scaping
Work insurance for employees
Subtotal Activity Supplies
Project Activity Costs
240 Activity Supplies
Install a fertigation pumping system - technician fees
Construction of Eight green houses - technician fees
Construction of Eight green houses - casual labor
Purchase of air conditioned track -permits
Construct of park house and cold room - technician fees
Prepared By:
Project:
Assumed Exchange rate
Heart For Africa
Life Time Quarterly Budget
2,686,741
8,064
0
0
392
0
0
1,120
560
5,040
15,176
Year 1
Oct-09
Sep-10
333,050
0
0
0
0
0
0
1,120
560
1,260
2,940
Q1
593,507
0
0
0
0
0
0
0
0
1,260
1,260
Q2
856,259
4,032
0
0
392
0
0
0
0
1,260
5,684
Q3
Quarterly Budget
903,925
4,032
0
0
0
0
0
0
0
1,260
5,292
Q4
6,308,285
8,064
16,128
143,360
672
2,800
0
2,016
2,240
13,440
188,720
Year 2
Oct-10
Sep-11
1,783,598
4,032
4,032
35,840
672
0
0
0
1,120
3,360
49,056
Q1
1,539,690
4,032
4,032
35,840
0
0
0
0
1,120
3,360
48,384
Q2
1,574,856
0
4,032
35,840
0
2,800
0
2,016
0
3,360
48,048
Q3
Quarterly Budget
1,410,142
0
4,032
35,840
0
0
0
0
0
3,360
43,232
Q4
4,258,934
0
16,128
143,360
0
0
0
0
2,240
13,440
175,168
Year 3
Oct-11
Sep-12
1,144,315
0
4,032
35,840
0
0
0
0
1,120
3,360
44,352
Q1
1,147,518
0
4,032
35,840
0
0
0
0
1,120
3,360
44,352
Q2
1,152,110
0
4,032
35,840
0
0
0
0
0
3,360
43,232
Q3
Quarterly Budget
1,275,982
0
4,032
35,840
0
0
0
0
0
3,360
43,232
Q4
APPENDIX
CORN PRODUCTION COST
Out Door production
For the period: October 2009 to April 2010
SITE: Sidvokodvo, SWAZILAND
ACREAGE: 12 hectares/30 acres
PRICE (USD)
AMOUNT (USD)
PRODUCTION COSTS
Fertilizers and Manure
Chemicals
3,100.00
670.00
Seeds
1,590.00
Casual Wages
3,240.00
SUB TOTAL
8,600.00
OTHER COSTS
Sacks
Transportation to Market
Tractor fuel
1,800.00
500.00
2,350.00
Tractor maintainance
500.00
Marketing
850.00
Overheads
400.00
SUB TOTAL
6,400.00
TOTAL COSTS
15,000.00
Figure 2.1
42
APPENDIX
Fish Production: COST AND PROFITABILITY ANALYSIS
26 Fish Ponds
1600 sq.M each
For the period: October 2010 to September 2011
Normal stocking (5 per cubic meter)
INCOME ON SALES
QUANTITY (KG)
Sales on export
Consumption by HFA orphanages
PRICE (R)
PRICE (USD)
80,000.00
31.45
3.70
1,950.00
31.45
3.70
TOTAL INCOME
AMOUNT (USD)
296,000.00
7,215.00
303,215.00
PRODUCTION COSTS
Manure
14,600.00
Feeds
113,000.00
Fingerlings purchase
40,000.00
Harvesting Wages
5,760.00
RUNNING COSTS
Regular employees
3,890.00
Guarding
1,945.00
Veterinary services & medicine
6,400.00
Road Transportation
9,120.00
Truck maintainance
2,100.00
Marketing
2,000.00
Pond maintainance
5,300.00
Electricity
3,200.00
Packaging
28,000.00
Overheads
3,000.00
Insurance and selective permits
2,300.00
TOTAL COSTS
240,615.00
EXCESS OF INCOME OVER COSTS
62,600.00
Profitability per kg of fish
$0.78
Profitabily as % of Selling price
21.15%
Figure 3.1
43
APPENDIX
Fish Production: COST AND PROFITABILITY ANALYSIS
26 Fish Ponds
1600 sq.M each
For the period: October 2010 to September 2011
Cage Stocking
INCOME ON SALES
QUANTITY (KG)
Sales on export
Consumption by HFA orphanages
PRICE (R)
PRICE (USD)
520,000.00
31.40
3.70
8,760.00
6.80
3.70
TOTAL INCOME
AMOUNT (USD)
1,924,000.00
32,412.00
1,956,412.00
PRODUCTION COSTS
Manure
14,600.00
Feeds
113,000.00
Fingerlings purchase
390,000.00
Harvesting Wages
11,520.00
RUNNING COSTS
Regular employees
97,300.00
Supervisors
6,000.00
Guarding
15,560.00
Veterinary services & medicine
12,800.00
Pond maintainance
14,000.00
Electricity
6,400.00
Road Transportation
54,720.00
Freight
210,000.00
Packaging material
150,000.00
Air machinery & Truck
15,700.00
maintainance
Marketing
24,000.00
Overheads
6,250.00
Insurance and selective permits
2,300.00
TOTAL COSTS
1,144,150.00
EXCESS OF INCOME OVER COSTS
812,262.00
Profitability per kg of fish
$1.56
Profitabily as % of Selling price
42.22%
Figure 3.2
44
APPENDIX
Fish Production Cash Flow
26 Fish Ponds
1600 sq.M each
For the period: October 2010 to September 2011
Cage Stocking
Starting
Year 1
Year 2
Year 3
Year 4
Year 5
year
Revenue
-
1956412.00
2054232.60
2156944.23
2264791.44
2378031.01
Expenses (excluding
-
(1144150.00)
(1086942.50)
(1032595.38)
(980965.61)
(931917.33)
IBDT
-
812262.00
967290.10
1124348.86
1283825.84
1446113.69
Depreciation
-
(118928.70)
(118928.70)
(118928.70)
(118928.70)
(118928.70)
NIBT
-
693333.30
848361.40
1005420.16
1164897.14
1327184.99
Taxes @ 30%
-
(207999.99)
(254508.42)
(301626.05)
(349469.14)
(398155.50)
NIAT
-
485333.31
593852.98
703794.11
815427.99
929029.49
Depreciation
-
118928.70
118928.70
118928.70
118928.70
118928.70
Cash inflow
-
604262.01
712781.68
822722.81
934356.69
1047958.19
depreciation)
Total cash inflow
$4,122,081.38
Total Project Cost
$1,212,766.40
Break even point on Investment 1 year, 6 months
Figure 3.3
Abbreviations
IBDT - Income Before Depreciation and Taxes
NIBT - Net Income Before Taxes
NIAT - Net Income After Taxes
Note 1
Depreciation of specific assets is as stated below: 2
Machinery & equipment 12% 3
Motor vehice 25% 4
Water supply 12.5% 5
Land & buildings Nil 6
The tax on non-profit making organization may be applied at 0%, and 30% for profit organizations
7
A 5% annual increase in revenue and 5% decrease in expenses is expected.
8
The value of depreciasion will be dependent on the assets invested.
45
APPENDIX
Range analysis of projected fish production, Project Canaan October 2010 to September 2011
Varying kilograms per cubic meter yield
12.33
12.83
13.33
13.83
0.37
0.37
0.37
Cost($) per cubic meter and per kilogram at varying yields
PRODUCTION COSTS in US$
Manure
0.37
Feeds
2.90
2.90
2.90
2.90
10.00
10.00
10.00
10.00
0.30
0.30
0.30
0.30
Total production costs per M3
13.57
13.57
13.57
13.57
Total production costs per kg
1.10
1.06
1.02
0.98
1,144,150.00
1,144,150.00
1,144,150.00
1,144,150.00
Total costs per M3
29.34
29.34
29.34
29.34
Total costs per Kg
2.38
2.29
2.20
2.12
2.70
1,298,349.00
1,350,999.00
1,403,649.00
1,456,299.00
3.20
1,538,784.00
1,601,184.00
1,663,584.00
1,725,984.00
3.70
1,779,219.00
1,851,369.00
1,923,519.00
1,995,669.00
4.20
2,019,654.00
2,101,554.00
2,183,454.00
2,265,354.00
2.70
153,878.40
205,151.70
259,935.00
312,834.60
3.20
394,313.40
455,336.70
519,870.00
582,519.60
3.70
634,748.40
705,521.70
779,805.00
852,204.60
4.20
875,183.40
955,706.70
1,039,740.00
1,121,889.60
Fingerlings purchase
Harvesting wages
Running costs
Returns per Cubic Meter above Total costs
Price ($ per Kg):
Net Income per varying prices and costs
Price ($ per Kg):
46
APPENDIX
Vegetable Production: COST AND PROFITABILITY ANALYSIS
36 Hectares of Outdoor Production
For the period: October 2010 to September 2011
Sold unpacked
INCOME ON SALES
QUANTITY (KG)
Sales on export
Consumption by HFA orphanages
PRICE (R)
PRICE (USD)
AMOUNT (USD)
576,000.00
13.60
1.20
691,200.00
8,760.00
6.80
0.80
7,008.00
TOTAL INCOME
698,208.00
PRODUCTION COSTS
Fertilizer
46,350.00
Chemicals
71,000.00
Seeds
86,400.00
Harvesting Wages
115,200.00
RUNNING COSTS
Regular employees
38,900.00
Supervisors
48,000.00
Electricity
2,600.00
Road Transportation
43,680.00
Machinery & truck maintainance
9,200.00
Marketing
3,000.00
Overheads
6,500.00
Insurance and selective permits
7,000.00
TOTAL COSTS
477,830.00
EXCESS OF INCOME OVER COSTS
220,378.00
Profitability per kg
$0.38
Figure 3.4
47
APPENDIX
Vegetable Production: COST AND PROFITABILITY ANALYSIS
36 Hectares of Outdoor Production
For the period: October 2010 to September 2011
Sold when packaged
INCOME ON SALES
QUANTITY (KG)
Sales on export
Consumption by HFA orphanages
PRICE (R)
PRICE (USD)
AMOUNT (USD)
576,000.00
28.00
3.50
2,016,000.00
8,760.00
6.40
0.80
7,008.00
TOTAL INCOME
2,023,008.00
PRODUCTION COSTS
Fertilizer
46,350.00
Chemicals
71,000.00
Seeds
86,400.00
Harvesting Wages
115,200.00
RUNNING COSTS
Regular employees
136,150.00
Supervisors
120,000.00
Electricity
4,200.00
Road Transportation
43,680.00
Freight
201,600.00
Packaging material
230,400.00
Machinery & truck maintainance
9,200.00
Marketing
24,000.00
Overheads
9,500.00
Insurance and selective permits
12,000.00
TOTAL COSTS
1,109,680.00
EXCESS OF INCOME OVER COSTS
913,328.00
Profitability per kg
$1.59
Profitability as % of selling price
45.30%
Figure 3.5
48
APPENDIX
Cash Flow for vegetable production
36 hectares of out door production
For the period: October 2010 to September 2011
Based on extrapolated data from the cost & profitability analysis
Revenue
Year 1
Year 2
Year 3
Year 4
Year 5
2,023,008.00
2,124,158.40
2,230,366.32
2,341,884.64
2,458,978.87
Expenses (excluding
depreciation)
(1,109,680.00) (1,165,164.00) (1,223,422.20) (1,284,593.31) (1,348,822.98)
IBDT
913,328.00
958,994.40
1,006,944.12
1,057,291.33
1,110,155.89
Depreciation (Approximated)
(84,000.00)
(84,000.00)
(84,000.00)
(84,000.00)
(84,000.00)
NIBT
829,328.00
874,994.40
922,944.12
973,291.33
1,026,155.89
(248,798.40)
(262,498.32)
(276,883.24)
(291,987.40)
(307,846.77)
580,529.60
612,496.08
646,060.88
681,303.93
718,309.12
84,000.00
84,000.00
84,000.00
84,000.00
84,000.00
664,529.60
696,496.08
730,060.88
765,303.93
802,309.12
Taxes @ 30%
NIAT
Depreciation (Approximated)
Cash inflow
Total cash inflow
$3,658,699.62
Total Project Cost
$1,470,738.00
Break even point on Investment 2 years
Figure 3.6
Abbreviations
IBDT - Income Before Depreciation and Taxes
NIBT - Net Income Before Taxes
NIAT - Net Income After Taxes
1
Note Depreciation of specific assets is as stated below: 1.1
Machinery & equipment 12% 1.2
Motor vehice 25%
1.3
Water supply 12.5%
1.4
Land & buildings Nil
2
The tax on non-profit making organization can be applied at 0% and 30% for profit making corporations
3
A 5% annual increase in revenue and expenses is predicted
4
A 5% annual decrease in expenses is expected
49
APPENDIX
50
Contour Map
APPENDIX
Green Houses Layout
51
Heart for Africa is a faith-based not-for-profit 501(c) 3
organization working to bring HOPE to Africa in the
areas of Hunger, Orphans, Poverty and Education.
www.heartforafrica.org